Guest essay by Eric Worrall

Elon Musk’s Tesla shares have plunged in value this week. Analysts cite competition and production concerns.

Tesla’s Stock Selloff Messes Up Musk’s Big Week

By Dana Hull
8 July 2017, 02:47 GMT+10

• Execution and competitive risks cloud cheaper car’s arrival
• Stock is on course for its worst week since February 2016

This was supposed to be Elon Musk’s big week, capped by Tesla Inc.’s first Model 3 sedan rolling off the assembly line. Instead, shares that had been riding high in anticipation of his most consequential car yet are poised for their worst week in almost a year and a half.

A troublesome quarterly sales report, the emergence of competing electric vehicles from the likes of Volvo Car Group and lingering concern about Tesla’s ability to mass produce have sent its stock down 13 percent this week. Modest gains in Friday trading still have left the shares on course for their steepest weekly drop since February 2016, and Tesla’s market value has dropped back below General Motors Co.

This week’s worries put a damper on the arrival of the linchpin to Musk’s growth ambitions. For Tesla, bringing out Model 3 and becoming more of a mass-market carmaker will require overcoming the routine manufacturing issues that have handicapped output of batteries or Model X sport utility vehicles. And so-called legacy automakers have sent a clear signal they won’t go down without a fight — Volvo underscored this by announcing all of its new models will have hybrid or fully electric powertrains from 2019.

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Tesla will soon have more competition coming from major carmakers, Barclays Plc analyst Brian Johnson said.

“We’ve long argued that Tesla as an EV company is not truly disruptive, in that legacy carmakers will eventually wake up and offer fully electric vehicles by the early 2020s,” Johnson wrote in a report Wednesday.

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This plunge in share value could be a short term blip. But given the interest expressed by established carmakers in embracing the electric or hybrid car markets, the pressure appears to be on for Elon Musk to explain what he does which is so different – why people should continue to invest with him, rather than investing with other, more established carmakers.